NYT Hightlights Decentralized Nature of Modern Filesharing

The Ninth Circuit had found Napster liable because the company itself maintained and controlled the servers that searched for the digital files its users wanted to download. Grokster and StreamCast, by contrast, operate decentralized systems that allow users to find each other over the Internet and then exchange files directly. Consequently, the appeals court said, the two services did not exercise the kind of control that could lead to legal liability for infringing uses.

WASHINGTON, Dec. 10 – The Supreme Court, accepting urgent pleas from the recording and film industries, agreed on Friday to decide whether the online services that enable copyrighted songs and movies to be shared freely over the Internet can be held liable themselves for aiding copyright infringement.

For the entertainment industry and for everyday consumers, the case is likely to produce the most important copyright decision since the Supreme Court ruled in 1984 that the makers of the videocassette recorder were not liable for violating the copyrights of movies that owners of the devices recorded at home.

The earlier decision, Sony Corporation of America v. Universal City Studios, ushered in one technological revolution. The new case, Metro-Goldwyn-Mayer Studios v. Grokster Ltd., No. 04-480, comes as another is already well under way. More than 85 million copyrighted songs and a smaller but rapidly growing number of movies are downloaded from the Internet every day by people using file-sharing services.

A lawsuit filed by the entertainment industry in 2000 eventually put the earliest file-sharing network, Napster, out of business. The industry then brought suits against individuals who shared copyrighted material over the Internet, but that proved inefficient. The defendants in the case the justices accepted today are two of the newer services, Grokster and StreamCast Networks, which offers peer-to-peer software called Morpheus.

Two lower federal courts in San Francisco, the federal district court there and the United States Court of Appeals for the Ninth Circuit, ruled that the technology of the new services is different from Napster’s in a way that immunizes them from liability for aiding copyright infringement.

The Ninth Circuit had found Napster liable because the company itself maintained and controlled the servers that searched for the digital files its users wanted to download. Grokster and StreamCast, by contrast, operate decentralized systems that allow users to find each other over the Internet and then exchange files directly. Consequently, the appeals court said, the two services did not exercise the kind of control that could lead to legal liability for infringing uses.

In their Supreme Court appeal, the recording industry and the Hollywood studios are arguing that the Ninth Circuit erroneously relied on a distinction without a difference. “The Ninth Circuit has immunized Grokster and StreamCast from copyright liability for the millions of acts of copyright infringement that occur on their services every day, and that could not occur but for the existence of their services,” the plaintiffs’ brief told the court.

The large group of plaintiffs includes the Motion Picture Association of America, the Recording Industry Association of America, Warner Brothers Entertainment Inc. and a class of 27,000 music publishers and songwriters. The Supreme Court will hear the case in March and is expected to decide it by late June.

The plaintiffs’ appeal included dire warnings about what would befall the entertainment industry and individual artists if the Supreme Court failed to intervene. The brief asserted that the Ninth Circuit’s decision, issued in August, “poses a grave threat to the very foundations of the copyright law’s incentive system for promoting the progress of science and the arts, and will profoundly reshape our nation’s system of copyright in the digital era.”

Friend-of-the-court briefs were filed on the industry’s behalf by the attorneys general of 40 states; a group of 130 recording artists; and 15 national organizations, including professional sports leagues, that described themselves as dependent on “meaningful copyright protection.”

For their part, Grokster and StreamCast described the plaintiffs’ arguments as “hyperbolic” and told the court that there was no need to enter a dispute that Congress was able to resolve. Several bills that directly address file sharing are pending before Congress now, the brief said.

As part of their argument that the plaintiffs’ cries of doom were exaggerated, the brief quoted a 1983 warning by Jack Valenti, then president of the Motion Picture Association of America, which was challenging the video cassette recorder as a copyright infringer, that “the VCR is to the American film producer and the American public as the Boston Strangler is to the woman home alone.” Video sales turned out to be very profitable for the studios.

Grokster and StreamCast offered their own “friends of the court”: the Computer and Communications Industry Association, representing software developers and Internet service providers, and the Internet Archive, a nonprofit “Internet library” of historical collections. They urged the court not to interfere with new technology forms and markets.

How to interpret and apply the 1984 Sony decision is likely to be central to the Supreme Court’s decision. The court held there that because VCR’s were capable of “substantial noninfringing use,” like time-shifting by people who recorded programs for later viewing, the manufacturers should not be liable for any infringing uses. The Ninth Circuit applied that principle to the file-sharing context. But the plaintiffs argue in the new case that because it is undisputed that most users of the file-sharing services use the software in ways that violate copyright, the immunity the court gave the VCR manufacturers should not apply.